Do you ever wonder how entrepreneurs manage to budget? I mean they have no idea what their income will look like from one month to the next. While I previously thought they were crazy, I recently made the switch and started freelancing full-time, making our family of two’s budget completely based on an irregular income (my husband is a salesman).
Guess what, guys? It’s really not that hard! Being the weirdo detailed control freak that I am, I tried to make things super complicated at first. But sometimes the best way IS the easy way and I wanted to share how we do it with all of you.
Tips for Budgeting an Irregular Income
1. Budget based on your lowest income month. Use the lowest amount of money you bring in on any given month to create your budget. Not only will this ensure that you are never short — even during slow months — it will also make any money made above and beyond this amount a bonus!
We take the lowest possible amount we make and keep our bills lower than that. And that’s why we live in a studio without furniture.
2. Have a buffer. Keep an emergency fund as well as a checking account buffer. This will come in handy should you ever have unexpected expenses come up (spoiler alert: you will, everyone does) or if one month you dip below your lowest income month.
In addition to our $1,000 emergency fund, we also saved up an extra month of expenses in our bills account. So at the beginning of October, we will actually be covered for October and November.
3. Write down your debt/saving/spending goals. Any month that you exceed your lowest income month (which should be most) will leave you with excess cash. Make sure you know what to do with it! By prioritizing debts to pay off, savings, and/or things you need/want to purchase, you will know exactly what to do with that cash instead of blowing it like a coked up rock star. Have a game plan for it!
We currently have three lists: one with our debts listed in order of priority, one with things we want to save up for (FinCon13 and going home for Christmas), and one with the things we need want to buy. Knee-high cognac boots, anyone?
4. Hustle your ass off! Having an irregular income means that YOU are in control of how much you make. Of course there are external factors, but you have more control than a typical employee. Work hard and smart to get your income up month after month. Setting goals is a great way to do this!
As competitive people, my husband and I do better with income and productivity goals in place. We work much harder to beat them!
Does your household live on irregular income? What tips do you have for others trying to budget an irregular income? Can someone give me the okay to buy knee-high cognac boots, please?